The breakeven point is the point at which
A) fixed costs equal variable costs.
B) contribution margin equals fixed costs.
C) sales equal variable costs.
D) fixed costs equal sales.

Question

Quizplus · Accepted Answer

The breakeven point is the point at which the revenue generated by sales equals the total costs associated with producing and selling the product. The contribution margin is the difference between the sales price and variable costs per unit, which represents the amount available to cover fixed costs and contribute to profit. Therefore, the breakeven point occurs when the contribution margin equals fixed costs. Option A is incorrect because fixed costs are independent of the level of production, while variable costs change with the level of production. Option C is incorrect because at the breakeven point, sales revenue only covers the variable costs and not the fixed costs. Option D is incorrect because sales need not equal fixed costs for the company to break even.

The Breakeven Point Is the Point at Which